The volatility in the broader digital currency ecosystem is at its peak, with a visible impact on Ethereum (ETH). For the first time this year, Ethereum’s price dropped below $2,000 as bear action sets a new bearish milestone.
While the volatility impacts Bitcoin (BTC) and other altcoins, Ethereum has faced a more intense selloff. Since December 14, ETH price has dropped by about 50% as the market sheds $1.2 trillion.
The selloff has several layers fueling it, the most visible being the Donald Trump-influenced economic uncertainty.
Bitcoin and Ethereum Price Outlook
At the time of writing, Bitcoin’s price changed hands for $78,220, down by 5.92% in 24 hours. ETH price comes in at $1,901.36 after selling off 5.45% of the coin’s valuation.
Other altcoins, such as XRP, Solana (SOL), and Cardano (ADA), also suffered intense selloffs. Although Cardano recorded the most significant price selloff, at 6.18%, Solana had more liquidations, at $34 million in 24 hours.
In the altcoin market, the Ethereum performance comes off as more of a concern. The spot Ethereum ETF product with defined inflows has not helped either, as overall selloff in the past 14 days has topped 14%.
The volatility in the market has triggered a combined liquidation of $828 million from over 268,000 traders.
Of the total assets, ETH liquidation in 24 hours is $197.18 million. While long liquidations top $157 million, short traders account for $39.82 at the time of writing.
Why Is The Crypto Market Falling?
According to The Kobeissi Letter analysis, crypto and the S&P 500 have lost $5.5 trillion in the last 2 months. Kobeissi partly attributed the selloff to the February 1, 2025, trade war.
However, the market has been anticipating this trade war since mid-June 2024 during the US Presidential campaigns. Before the tariff hike threats, most stock indices, like the S&P 500, recorded new highs.
Notably, The Kobeissi Letter noted that the real culprit behind the market selloff is the shift in risk appetite. In a matter of days, the market has moved from extreme greed to extreme fear.
There was a precedent to this selloff beyond the crypto market. The percentage of capital in the Magnificent 7 has recently dropped significantly.
This trend trickled down into the crypto market. As of February 9, the institutional build-up into short Ethereum positions attained its largest level in history.
Unfortunately, it coincided with the embrace of BTC and altcoins in hopes of a crypto strategic reserve. With the relative disappointment in the strategic reserve play, investors have had to exit key market positions picked earlier.
At the moment, the sentiment in the crypto industry cautions risk-averse investors. With more than $3.5 billion in outflows over the past week, bears in the market are likely getting exhausted.
Crypto Market’s Strategic Play for 2025
According to The Kobeissi Letter, there is an incoming shift in positioning overall. The publication noted that investors who get ahead of these shifts will be the biggest winners this year.
It noted that bullish swings are bound to broaden since the Volatility Index has surged by over 70% in the past 30 days.
As Kobeissi noted, the Dow Jones will likely experience at least a 1,000-point surge moving forward.
Considering the correlation with crypto, Bitcoin and Ethereum prices may also see an increased rally overall.
Source: https://www.thecoinrepublic.com/2025/03/10/real-reason-behind-1-2-trillion-crypto-market-crash/